A New Model for Business Decision Making

The Capitals Model is a framework that helps organizations recognize that long-term value creation depends on more than just financial assets. Developed and promoted by the Capitals Coalition, the model encourages businesses and institutions to account for four interconnected forms of capital: natural, social, human, and produced (or financial) capital. Natural capital includes environmental resources like air, water, biodiversity, and ecosystems that provide essential services such as clean water and climate regulation. Social capital refers to the relationships, trust, and networks that enable societies and economies to function effectively. Human capital encompasses the skills, knowledge, health, safety, and wellbeing of people—core elements that drive productivity and innovation. Finally, produced capital consists of physical and financial assets such as infrastructure, tools, and investments used in production.

“Every time we ignore human capital, we gamble with resilience and call it cost savings.”

The purpose of the model is to help organizations understand their dependencies and impacts across all these capitals, leading to better-informed decisions that balance financial, environmental, and social outcomes. By incorporating these multiple dimensions into planning and reporting, the Capitals Model promotes long-term resilience, risk awareness, and integrated value creation. It is increasingly used in sustainability reporting frameworks such as the CSRD (Corporate Sustainability Reporting Directive) and TNFD (Taskforce on Nature-related Financial Disclosures), as well as in ESG investing and corporate risk assessments. Ultimately, the Capitals Model challenges traditional, siloed thinking and emphasizes that organizations cannot fully measure or manage value if they ignore the real sources of it—people, nature, and society.

How it Differs

The Capitals Model differs significantly from the traditional financial model used in most businesses today by broadening the definition of value and encouraging a more holistic approach to decision-making. While the traditional model focuses almost entirely on produced capital—such as financial assets, infrastructure, and short-term profitability—the Capitals Model recognizes four types of capital: natural, social, human, and produced. This expanded perspective acknowledges that ecosystems, people, and communities are not just costs or risks to be managed but are core contributors to long-term value creation.

Another key difference is how each model treats externalities. The traditional financial model often ignores or externalizes environmental and social impacts—such as pollution, resource depletion, or workforce health—unless they directly affect the bottom line. In contrast, the Capitals Model seeks to internalize these impacts, making them visible and measurable so that they can be incorporated into strategic planning. It also differs in its time horizon. Traditional models prioritize short-term financial returns and quarterly performance, whereas the Capitals Model emphasizes long-term sustainability, resilience, and the ability of all capitals to continue generating value over time.

In terms of decision-making, the traditional approach typically evaluates options based on narrow financial return metrics, while the Capitals Model encourages integrated thinking that considers broader risks and opportunities tied to natural systems, human wellbeing, and social cohesion. Finally, the Capitals Model promotes more transparent and integrated reporting by aligning financial and non-financial performance measures. Rather than replacing the traditional model, it enhances it by providing a fuller, more realistic view of how organizations create, preserve, or destroy value across multiple dimensions.

Focus on Human Capital

Human capital refers to the collective value of the knowledge, skills, experience, health, motivation, and wellbeing that individuals bring to an organization. Unlike machines or buildings, human capital is a dynamic and renewable resource that grows through education, training, experience, and engagement. It is essential not only for productivity and operational success, but also for innovation, adaptability, and organizational resilience. Employees are the ones who solve problems, improve processes, build relationships, and respond to crises. Their insights and performance often determine whether safety protocols are followed, quality standards are met, and customers are retained. Yet, in traditional financial models, people are usually treated as expenses (e.g., salaries, benefits) rather than as value-generating assets. This leads to under investment in workforce development, wellbeing, and safety—despite the fact that losses related to disengagement, burnout, or injuries often far exceed those related to equipment failures.

By recognizing human capital as a core asset, organizations can shift from a cost-control mindset to an investment mindset. This means prioritizing not just technical training, but also mental health support, inclusive work cultures, and leadership development. In the context of safety, for example, valuing human capital helps justify investments in better work design, human-centered controls, and robust incident prevention—not just because it avoids harm, but because it preserves the organization’s most critical and irreplaceable resource: its people. When human capital is properly valued, it becomes clear that protecting and developing the workforce is not just a moral obligation, but a strategic and financial imperative.

Example Application for Safety Improvement

Integrating human capital concepts into the justification of capital expenditures to abate prioritized risks fundamentally strengthens the risk assessment process by illuminating the often-overlooked economic value of the workforce. In traditional models, risk abatement is typically justified through cost-avoidance calculations—preventing equipment damage, production losses, or regulatory fines. However, this approach often undervalues or entirely omits the impact of risks on people, treating injuries, fatigue, or human error as incidental rather than as substantial threats to organizational performance and value. By applying human capital thinking, organizations begin to see the workforce not as a cost to be minimized, but as a key asset whose protection and enhancement is central to sustainable value creation.

When prioritized risks are identified—such as those involving high potential for human error, exposure to hazardous conditions, or excessive cognitive or physical demands—the decision to allocate capital should be informed by the potential loss or degradation of human capital if those risks go unaddressed. This includes quantifiable losses such as lost time from injuries, recruitment and retraining costs, and reduced productivity from disengagement, as well as harder-to-measure impacts like erosion of institutional knowledge, morale, and team effectiveness. By explicitly incorporating these human capital losses into the cost-benefit analysis, the financial justification for risk mitigation becomes more robust and realistic.

For example, a capital project to redesign a loading station prone to human error might not be justified if only equipment downtime and repair costs are considered. But if the analysis includes the value of preventing operator fatigue, preserving experienced personnel, and avoiding the downstream effects of injuries on morale and turnover, the return on investment becomes clear. In this way, human capital provides a powerful lens through which safety investments are reframed—not just as a means of avoiding harm, but as strategic initiatives to preserve the organization’s productive capacity, resilience, and long-term competitiveness. This shift ultimately leads to better-aligned decisions, more effective risk management, and stronger outcomes for both people and performance.

Here is a conceptual example of how to use human capital concepts in a spreadsheet-style cost-benefit analysis to justify capital for risk abatement. This example compares a traditional justification based on physical assets alone with an enhanced justification that includes human capital impacts.

Spreadsheet Example: Capital Investment Justification for Safer Loading Station

Key Insights

• The traditional analysis shows a marginal ROI and long payback, which may lead decision-makers to delay or reject the investment.
• By including human capital-related losses—such as lost productivity, turnover, and team disruption—the financial justification is dramatically strengthened.
• This approach makes it easier to align safety investments with business value and gain executive support.

I have been collaborating with other stakeholders on the Capitals Coalition’s Valuing Human Capital in Occupational Health & Safety project. This project engages current and future occupational health & safety professionals around the importance of valuing the health, safety and the wellbeing of workers through a capitals approach as set out in the Social & Human Capital Protocol.

Learn more about implementing the Capitals model at: https://capitalscoalition.org/capitals-approach/frameworkintegrated/